The big market shakers today were the Westpac assessment of the Australian economy and the US yields. Both events saw international investors rushing into Australian markets, boosting the performance of Aussie, ASX and the bonds. The Australian currency is on its path to recover the levels before the disappointing RBA news and is testing the 18-year high against the US dollar. The ASX rose to record, closing at 6396.9. The Australian 10-yr were in great demand seeing their yield go down to 6.204%, but they remain one of the most competitive rates in the world.
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[U][B]Headlines[/B][/U]
[B]Economic activity tipped to rise - index[/B] - Westpac-Melbourne Institute?s leading Index of Economic Activity that estimates the pace of economic activity in the next 3-9 months, printed 1.7 points higher to 251.7 index points. The economy is not only accelerating, but also traveling faster than previously thought. Bill Evans, the chief economist of Westpac, believes that RBA will raise rates under such pressure by 0.5 percentage points, but does not believe that it will happen next month when RBA meets again. Source: Herald Sun
http://www.news.com.au/heraldsun/story/0,21985,21937076-5012062,00.html
[B]Housing sector rebounds[/B] - The Dwelling Starts printed at 1.3% at 21:30 EST versus previous -0.8%, suggesting that the Australian housing market is strengthening. The rising interest rates and unaffordability of existing housing might be one of the largest contributors. A major investment bank remains skeptical, pointing out that the upswing will be temporary, as the interest rates are expected to hike, pushing affordability to record lows. Source: Herald Sun.
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[B]WA banning nuclear power stations[/B] - The Australian government banned building of nuclear power plants in Western Australia, as well as transportation and storage of radioactive substances in the region. Anyone attempting to build a nuclear power plant will be a subject to a $500,000 fine. As nuclear power is the only real alternative to currently dominating carbon fueled power stations, government expects pressure from environmentalists concerned about the climate change pressuring energy companies to build nuclear power stations. Apparently, government does not share their sentiment about nuclear power being “cleaner”. Source: Herald Sun.
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[B]Another exec quits BHP after Kloppers ascension[/B] - As Marius Kloppers got nominated as a successor of the current CEO Chip Goodyear, another executive left the company, leaving the new CEO with 3 top positions to fill now. John Fast was a long time chief legal counsel of the company and a close friend of Chris Lynch, a chief rival of Mr. Kloppers. BHP certainly had phenomenal performance recently, which is put into jeopardy with such dynamics of the executive team changing. Source: The Australian.
http://www.theaustralian.news.com.au/story/0,20867,21934792-5005200,00.html
[U][B]Currency[/B][/U]
Aussie is on its way to test an 18 year high. The primary driver was the effect of the US 10-yr bond yield fall to 5.07%, making Australia?s interest rate one of the most competitive in the world and attracting additional carry trade flows. Another driver was also the Australian corporate activity, namely the takeover talks that boosted the performance of ASX yesterday. Economic data also had its contribution as Westpac Leading Economic Activity index printed 0.7% versus last months? 0.2% and the leading economists at Westpac shaking the news with their bold statements about an exceptionally great condition of Australian economy, accelerating at unprecedented and unexpected rates. The housing starts that printed at 1.3% versus prior -0.8% added to the picture. Will the 18 year high be surpassed to set new records?
[U][B]Stock Market[/B][/U]
ASX was pulled in different directions today, but closed with a gain of 24.9 points at 6396.9. The fall of metal prices have dragged the exchange lower at the open. However, high oil prices and overall positive attitude about the robust state of the Australian economy reversed the situation. BHP Billiton that usually is in the lead of ASX advances, saw modest performance today, falling by 1.1% both based on falling metal prices and the turmoil of its top leadership. The leaders of the gain today were Australia and New Zealand Banking Group Ltd., gaining 0.4%, and Westfield Group, which rose 2.2%.
[U][B]Bond Market[/B][/U]
Today yesterday?s trend continued: as the US yields continued to fall, and Australian bonds attracted more capital lowering the yields at the open. The Westpac?s economic data gave an upward push for the yield, but it fell lower to the opening levels under the pressure of demand, closing at 6.204% or 3.3 basis points down.
